Do Consultancies Have an Unfair Competitive Advantage Over Agencies?

In a July 3, 2019, commentary on Media Post, staff writer Richard Whitman raised the question of whether consultancies – Accenture in particular – were more conflicted than holding companies.

While some agencies have on occasion refused to participate in agency searches that included agencies held by the client’s auditors, WPP has reportedly declined to participate in Accenture-managed agency searches.

Accenture, as well as a few other consultancies, still provide brands with consulting services which range from in-depth audits of client’s agency contracts, pricing, scopes and processes to managing agency searches (which also gives them detailed access to confidential proposals from participating agencies) and realigning agency rosters. And now of course they all hold a number of advertising agencies and related service providers.

As agency search consultants, we have argued over the years that there is indeed a far bigger conflict of interest than agencies within a holding company offering work to competing brands.

In the case of the latter, most agencies within holding companies don’t talk to each other – nor do agencies within a network of offices unless they share an account. This is not as true, however, of media agencies despite the claims of “fire walls,” but that’s a topic for another time.

However, the conflict for consultancies, in our opinion, could rise to unfair competitive advantages over the holding companies and their agencies – whether leading a client audit or managing an agency search, they do indeed receive detailed information that agencies have provided to clients in the form of proposals, contracts, scopes, staffing plans, pricing, and reconciliations.

Despite receiving assurances that there are strict safeguards between the consulting practice and the agency practice, we’ve had a few former new business leaders from consultancies who are now at holding company digital agencies tell us that the consulting team from their former employer did indeed share such confidential information with its agency new business developers.

While this is all hearsay, it’s definitely something the 4A’s and their member agencies should investigate and develop explicit clauses in their client contracts to prevent any unfair competitive advantages by consultancies.

For the ANA, with all its efforts around media and production issues, they should also be developing standards of client ethics around agency audits and procurement to ensure unfair competitive advantages for consultancies are avoided.

And, maybe, the DOJ needs get involved in this issue as well.

Bajkowski + Partners LLC is a leading consultancy providing services to marketing and procurement teams in the areas of agency relationship management, agency search, process audits, contract and SOW development and audits, and other marketing operations related areas. For more information, please visit our website.

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When did Agencies and Vendors become banks for their Clients?

Increased pressure from brands on their agencies and vendors to extend payment windows is greater than ever

Big brands such as General Mills and Chrysler have been throwing their weight around, putting their accounts into review of which payment window terms have reached a new low – or should we say high?

Last month, General Mills’ new creative agency review reportedly demanded a payment window of 120 days. And according to a post on Digiday, “Chrysler succeeded in pushing its payment window to 180 days last fall…And around the same time…a big brand started asking for payment terms of a full year, according to the 4As, which received complaints from creative and media agencies about the terms.”

While the client in that latter situation asked agencies to “work out a deal where on paper it looked as if the agencies had agreed to payment terms of one year,” we can only assume they’re having the agencies prebill far in advance and reconcile later.

At least that’s what we work out with clients and agencies we work with, whether we’re handling a search or modernizing their agency contracts that have to include such burdensome corporate-wide payment windows that go beyond a 30-day period.

The Digiday article further reveals that some marketers requiring these abnormally long payment periods assume that agencies should get financing to cover the widening payment to expense gap. Of course the client doesn’t want to pay the financing fees. And some even use third-party invoice processing systems that charge agencies for every invoice that is submitted – non-reimbursable of course.

Thought agencies were in the business of driving brand revenue through their communications expertise, not money-lenders to clients.

We wonder if client-side staff would be okay with being paid for their services rendered 120 days out.

Definitely not.

Is this what client’s really meant by wanting agencies to be their partners?

This is just another strain in the client-agency relationship.

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Apparently DOJ Not Finished With U.S. Media Buying Investigation

According to an article published by AdAge on March 25, 2019, the Department of Justice had impaneled a federal grand jury, enabling the U.S. Attorney to issue a subpoena to an unidentified “large marketer” for its media records.

This comes as a surprise given December 2018 reporting by both AdAge and Adweek that the DOJ had cleared five major holding companies.

The FBI’s investigation into U.S. media buying and transparency practices began last April as a result of a 2016 media transparency report, also known as the K2 Intelligence Report, released by the Association of National Advertisers.

The K2 report cited serious problems that went against media buying best practices and agency-client contracts.

This week’s AdAge article cites concerns among ANA member marketers over agency backlash and blacklisting should their participation in the K2 and DOJ investigations become public.

Apparently the DOJ has been working with a non-redacted version of the K2 report which contains the names of more than 40 sources that participated in the ANA-sponsored investigation.

 

Bajkowski + Partners LLC is a leading consultancy providing services to marketing and procurement teams including building in-house media planning and programmatic as well as in-house creative and production operations. For more information, please visit our website.

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UPDATE – Media Trading Practices Under FBI Scrutiny

According to an Ad Age article posted today, the FBI has turned to the Association of National Advertisers (ANA) and its members for cooperation with an ongoing “criminal investigation into media buying practices” of service providers.

There are a number of global media buying agencies caught up in the probe, but no word on larger local players being part of the investigation.

The FBI investigation was likely the result of the ANA’s own investigation amid complaints from members about transparency and contract compliance issues on the part of media buyers and the media suppliers.

The ANA probe resulted in the issuance of a K2 report in 2016 which supported member claims of some agencies withholding cash rebates from clients as well as other transparency issues, and a new, highly detailed, media contract template as well as best practices. While media buying practices and contract terms can vary by country, problems identified in the K2 report were not limited to international markets.

ANA members are encouraged to contact the organization’s lead counsel, Reed Smith, which serves as interface between the ANA and FBI, if they believe their media agency relationships warrant further scrutiny.

There is no indication at this time as to when the FBI investigation will be completed.

 

Bajkowski + Partners LLC is a leading consultancy providing services to marketing and procurement teams including building in-house media planning and programmatic as well as in-house creative and production operations. For more information, please visit our website.

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